.
BY GEORGE MOUSKIDES
The property sector is at the centre of the world economic crisis.
In Cyprus, the repercussions of the international crisis that began in the summer of 2008 are now clearly visible to everyone. The areas most affected are the coastal ones, where the prices in certain cases have decreased by 40%.
Demand throughout the island had decreased by 80% at the beginning of 2009 though in the last few months that rate has dropped to almost half.
During the last few months, there have been a number of signs that seem to indicate that there will be an upturn in the property sector. We do not imply that prices will rise but rather that more transactions will take place. The crisis is by no means over for Cyprus. We unquestionably still have a long way to go, but we hope that the more positive trends that we have seen in the last two or three months will constitute the beginning of an upturn.
The positive outlook that has begun to develop abroad might also be beneficial. The global economy and the international stock markets have made significant gains during the past five months and the signs that this will be followed by a stabilising period have intensified.
Many economists and so-called “gurus” of the property market stated that the international crisis will just now bring the worst to the Cypriot property sector. Our position is that we have been feeling the pressure for the last 12 months and that now the emerging positive trends internationally will positively influence the property sector in Cyprus as well.
The main pillars of the Cypriot economy are tourism, the services industry and naturally, over the last ten years, the property sector. The education and health sectors have also contributed, but on a smaller scale.
The first three are in essence influenced by external factors; that is by the economic situation of the foreign “clients”. Consequently, from the moment that there appears to be an upturn internationally, we hope that this will also filter through to Cyprus.
On a positive note, there seems to be tendency in the U.K. tourism market for last-minute bookings. The British, that did not take a vacation this year because of fears about the economic crisis, have now begun to look for options for a belated vacation. Some of these tourists, we hope, will select Cyprus for their holidays.
The unemployment levels have increased in Cyprus and will continue to rise further in the coming months but not to an alarming degree. Unemployment is always higher this time of the year, i.e. after the summer holiday season. This year it will be higher.
Since our economy is facing increased economic as well as structural problems, maybe we should use this time to tidy up our finances and opt for structural changes that are long awaited. For example, it does not require a genius to know that the cost of government administration in Cyprus is per capita amongst the highest in the European Union and that we must take immediate action. Without affecting the benefits of the existing civil servants, we should come up with a scheme that should reduce the cost of government to reasonable levels whilst improving the level of service that the private sector is enjoying from the state.
We view the 3 billion euros package that will be deposited with banks as a positive move, as well as the grants intended for loans to small and medium-sized enterprises.
In conclusion, with additional measures that the government must take, and with the improving economic conditions internationally, the situation in Cyprus will begin to become more positive and this, according to all visible signs, will first and foremost influence the property sector.
George Mouskides is Chairman of the Association for the Promotion of Property Development and Manager, Fox Smart Estate Agency.
